IndusInd and Bharat Financial have entered into exclusive talks for a potential strategic combination, both sides said in separate statements on Monday, without providing details on what a potential deal would look like or how long they would pursue the talks.
The two financial firms had long been speculated to be interested in a deal, with analysts saying previously it could come in the form of a share swap.
IndusInd Bank is India's sixth-largest private sector lender by assets and has a market value of about $16 billion, while Bharat Financial Inclusion, formerly known as SKS Microfinance Ltd, is valued at more than $2 billion.
"Of late (IndusInd Bank) has been talking about increasing the proportion of their consumer business. This deal would help it achieve that," said Nitin Aggarwal, an analyst with brokerage Antique Stockbroking.
Credit Suisse said in a note last week Bharat Financial was one of the best-capitalised microfinance players in the market, one that was gaining market share.
IndusInd Bank shares were up 0.97 percent at Rs 1,712.35 as of 11 am, while Bharat Financial Inclusion gained 2.21 percent on NSE that was trading 0.5 percent higher.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)